Annual health care costs for a typical American family now exceeds $25,000

In 2016, the cost of health care for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $25,826, according to the Milliman Medical Index (MMI). The cost of care has tripled since its value of $8,414 in 2001, Milliman noted. While the increase from 2015 to 2016 was the lowest annual increase Milliman has measured (at 4.7 percent), the rate of increase is still well above the growth in the consumer price index (CPI) for medical services.

Of the $25,826 figure, employees’ typically pay $11,033, while employers typically pick up the rest of the tab. In 2001, employers paid 61 percent of costs while employees paid 39 percent. According to Milliman, in 2016, the same split is 57 percent and 43 percent. Employees are shouldering more of the healthcare cost burden than they were 15 years ago.

Prescription drugs account for nearly 17 percent of total health care spend. In 2016, the MMI family’s prescription drug costs will reach $4,270. That’s almost four times as much as the $1,111 in prescription drug expenditures the family had in 2001. However, prescription drug expenses grew at 9.1 percent from 2015 to 2016, a lower rate than last year’s 13.6 percent increase.

Specialty drugs now constitute approximately 35 percent of total prescription drug costs, and nearly 6 percent of total health care spend. Fifteen years ago, specialty drug costs were a small sliver of the health care cost pie. Although increases in total drug costs may spike or moderate in the short-term as new drugs are introduced or as patents expire, long-term expectations are that these very expensive drugs will continue to be a growing proportion of total health care costs.